July 20, 2011

Liberals, Lay Off Richard Cordray: He’ll Be a Great Consumer Watchdog

Poor Richard Cordray. Ever since he was nominated earlier this week to head the Consumer Financial Protection Bureau (CFPB), liberals have given him a rather cold reception. The reason is simple: He is not Elizabeth Warren. Paul Krugman called Obama’s abandonment of Warren—whom Republicans had vowed to block—“really sad,” while National Journal reported that the selection “did nothing to gin up Obama’s base.”

It’s no surprise that liberals reacted this way, given the enthusiasm they have for Warren. And, at least on judicial nominations, it is certainly true that Obama has developed a track record of favoring conciliatory nominees rather than bold liberals. But before Democrats assume that Cordray represents yet another disappointment from the Obama administration, they should actually take a look at his record. If they do, they will probably like what they see.

While serving as Ohio’s attorney general between 2008 and 2010, Cordray unleashed a flurry of lawsuits against banks and financial giants. He honed in on financial malpractice that had caused massive losses to Ohio’s public pension and retirement funds. He sued ratings agencies, including Moody’s and Standard and Poor’s, accusing them of giving AAA ratings to junk debt, and filed a class-action lawsuit against Bank of America, arguing that it concealed serious weaknesses from shareholders, including billions of dollars in losses, when it asked them to vote on its acquisition of Merrill Lynch. He also secured a $725 million settlement from AIG.

In fall 2010, after the foreclosure robo-signing scandal mistakenly kicked thousands of people out of their homes and temporarily halted foreclosures in Ohio and 22 other states, Cordray took a tough stance. When Bank of America was ready to resume foreclosures after a hasty three-week review that claimed to have looked into 100,000 cases without finding any errors, Cordray was skeptical: “These are the same people who have essentially acknowledged that they committed fraud,” he said in a statement. “Now they tell us that they have fixed the problem in a matter of weeks. We are certainly not just going to take their word for it.” In the same month, Cordray filed a lawsuit against GMAC Mortgage for foreclosure fraud. Not long after, in November 2010, Cordray was defeated, losing by a tiny margin to a former Ohio senator. But, within weeks of that loss, he was handpicked by Warren herself to serve as director of enforcement at the CFPB.

Not surprisingly, consumer groups have high praise for him. “He was at the forefront of the mortgage servicing wars,” Ed Mierzwinski, director of the consumer program at U.S. PIRG, told me. Lauren Saunders, managing attorney at the D.C. office of the National Consumer Law Center, told me that Cordray is “committed to a balanced approach,” calling him “someone who understands the real problems there are in the marketplace.” In The Washington Post, an official from the Consumer Federation of America praised Cordray as “a national leader” who has been “vigorous in trying to better protect consumers from financial abuses.”

The most pressing question now is whether Cordray (or any nominee) can be confirmed. In May, 44 Republican senators signed a letter saying they would oppose any nominee to lead the bureau until it is restructured—with the director’s job replaced by a five-person commission—and they have moved to drastically cut the new bureau’s funding, effectively strangling it in the crib. It’s safe to say, given this multi-front attack, that Cordray’s confirmation will be contested. But, as Mierzwinski of U.S. PIRG points out, that’s not a sign of the White House’s timidity. “It’s going to be tough to confirm him because he’s good,” he says. “He is going to be a fighter, I think.”